Life insurers finally do the right thing on unpaid benefits

Desiree Tibbets' mother died in 1995. Her father passed away four years later.

Yet Tibbets, 39, never knew -- and was never informed by her parents' life insurer, Prudential -- that she was the sole beneficiary for their policies.

"This is really upsetting," the Ontario resident said. "I would have thought they had an obligation to get the money to me."

At the very least, Prudential was required by California law to hand over the money to state officials three years after Tibbets' parents' account was deemed inactive. But it didn't do that either.

For The Record Los Angeles Times Tuesday, June 25, 2013 Home Edition Main News Part A Page 4 News Desk 1 inches; 22 words Type of Material: Correction Automated operators: A June 18 consumer column item in the Business section about automated switchboard messages misidentified Five9 Inc. as 5nine Software.

Instead, state Controller John Chiang said, Prudential and more than a dozen other insurance companies continued deducting premiums from people's policies until all cash was depleted. Then they closed down the accounts without notifying beneficiaries.

"I just can't see how these insurance people feel comfortable taking money that could help a widow or widower keep the lights on," Chiang told me. "Even though they know that someone has passed away, they won't do anything until a claim is submitted."

His office has joined other states in putting the squeeze on insurers. Nearly $267 million in unpaid death benefits already has been recovered for California beneficiaries. The latest settlement, with 11 life insurers, was announced this month.

At the heart of the issue, Chiang said, is what's known as the Death Master. This is a file, based on Social Security data, that insurers use on a regular basis to see which policyholders have died recently.

Not only does this let insurers know when premiums won't be paid anymore but also when annuities no longer have to be sent out.

Most insurance policies state that the onus is on a beneficiary to file a claim after a loved one's death. But in this age of databases such as the Death Master, Chiang said, it's ethically and morally wrong for an insurer to sit back and do nothing after finding out that a policyholder has passed away.

"They should do what they promise," he said. "If you're going to spend billions of dollars advertising that you'll be there when people need them, then you should do it. You should do the right thing."

The insurance industry apparently has chosen not to quibble over who's right and who's wrong. Pressed by state officials, leading insurance companies have been lining up to settle claims over unpaid benefits.

Chiang's office has announced settlements with Prudential, MetLife, John Hancock, American International Group, Transamerica, New York Life and other insurers.

But it can sometimes be tough tracking down a beneficiary after years have passed. In Tibbets' case, the controller's office sent a letter to her parents' last known address with word that money had been recovered from Prudential. The letter was returned unopened.

Tibbets might not have ever found out that she was due a payout if she hadn't received a letter last summer from an outfit calling itself Kendra Asset Recovery, which, according to its website, "researches and locates lost assets."

The company said it had become aware of $11,000 owed to Tibbets. It offered to help her get the money in return for 10% of the action, or $1,100. There's nothing illegal about this. But don't be misled by such offers.

"You don't have to pay that fee," Chiang said. "You've already paid for this service through your taxpayer dollars."

All unclaimed assets taken in by the controller's office can be reviewed online by going to the website Claimit.ca.gov. All you do is enter your name and see what comes up.

Luckily for Tibbets, a friend told her about the controller's website before she agreed to Kendra's terms. She searched for her name and quickly found the $11,000 that Prudential had coughed up as part of its January 2012 settlement.

Tibbets filled out some paperwork, waited a few months for the documents to be verified and received her check.

"It's totally doable," she said. "Very easy."

I asked Prudential why it didn't hand over the money to Tibbets after her father died in 1999.

Sheila Bridgeforth, a company spokeswoman, declined to comment but said Prudential believes that "there is nothing more important than honoring our obligations to our policyholders."

And that's no doubt why they settled with California last year to the tune of about $47 million.

Menu options

It's a chronic annoyance: You call a company and the automated switchboard instructs you to listen to the entire message "because our menu options have recently changed."

Are companies really changing their menu options this often?

"That's a good question," said Madelyn Gengelbach, director of market intelligence for InContact, an automated switchboard provider. "I also hear that message routinely."

She said many companies actually do fiddle with their menu options to improve customer service, but some simply want to keep people from getting anywhere near a human being. So they try to trick you into hearing the whole message in hopes that you'll accept some automated response to your issue.

"There are certainly organizations where that's the norm," said Liz Osborn, vice president of product and solution marketing for 5nine Software, another provider of automated switchboards.

I'm not telling companies how to do business. But they may want to reconsider a policy of blatantly lying to customers.

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David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send tips or feedback to david.lazarus@latimes.com.